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The Importance of Strategic Customer Segmentation for Retailers

As most retail marketers understand, being able to easily access and interact with customer data is essential to creating effective campaigns and positive customer experiences. And while frequent communications with your target market help to build rapport, being able to break down your customer base into smaller groups to focus on can also be a big benefit to your business. This is known as customer segmentation, and helps your organization produce targeted, relevant messages for your various customer groups.

Customer segmentation isn’t a one-size-fits-all kind of thing however, as there are a number of ways marketers can divide their customers up, and it all depends on their goals. This is where establishing a customer segmentation strategy (and likely, strategies) could be a big benefit for retailers.

Different types of customer segmentation

When it comes to customer data, more is always better. But just having lots of it doesn’t necessarily get you far; it’s the quality and type of information marketers have at their fingertips that makes the difference. Gathering detailed customer data is extremely useful for creating personalized marketing experiences, and customer segmentation helps marketers create multiple approaches to a single campaign to better target particular segments of a customer-base.

There are generally four popular categories of customer segmentation:

Demographic segmentation, which includes information such as age, education level, ethnicity, gender, and income. This data can be easily uncovered by having customers fill out forms during the checkout process, or when interacting with emails they receive. Customer data of this nature helps marketers send promotions specific to certain population groups (like Baby Boomers vs. Millennials vs. Gen Z, for example), which is particularly useful if the retailer offers a wide range of products.

Geographic segmentation, which includes information such as country, region, and state of residence. Customer data of this nature helps marketers who have global organizations and lets them personalize communications based on current events in their customers’ particular region. No customer wants to receive a promotion for summer gear when it’s the dead of winter where they live.

Behavioral segmentation, which includes information on the way your customers interact with your brand. This might include customer data on recently purchased or viewed products, which gives marketers insight into potential future purchases or related items the customer may be interested in. Taking advantage of this data allows retailers to send messages promoting similar products or promotions on the purchased or viewed product to encourage resale and turn them into a recurring customer.

Psychographic segmentation, which includes information such as beliefs, interests, lifestyle, personality traits, and values. This kind of customer data is most easily gathered through surveys and can help retailers promote products that strike at their customers passion. For example, if a customer indicates that they enjoy spending time outdoors, marketers can send them promotions on outdoor living products (like backyard activities or camping equipment).

Being able to segment customer data into these channels is invaluable for creating personalized marketing that makes customers feel recognized and appreciated. Grouping customers based on their similarities also helps marketers to prioritize the key segments of their customer base and focus their efforts on customers that will provide positive lifetime value.

Ensure your customer data is easy to access

An often overlooked aspect of developing a customer segmentation strategy is determining if your organization has a reliable system in place for managing customer data. Traditional databases, data lakes and data warehouses can be tricky to navigate and use because of the vast amount of information they contain, and in a worst-case scenario they’re actually a hindrance to marketers and make their jobs more difficult. However, without a central location, retailers tend to have their customer data spread across multiple systems, making it difficult for marketers to get a complete and accurate view of their customers.

To ensure customer data is easy to access and manage in one system, consider implementing a customer data platform, like that offered by QuickPivot. QuickPivot’s customer data platform features easy-to-use functionality, including for customer segmentation, that allow marketers to quickly turn their customer data into actionable insights and produce more effective campaigns.